Russia may admit foreign companies to deposits they discover

MOSCOW, July 31. /TASS/. Measures to facilitate foreign companies’ admission to developing Russian natural resources deposits may benefit Russia, experts said on Friday, commenting on a bill prepared by the government.

Russia’s Natural Resources Ministry has submitted a bill to the government, under which a foreign company will receive guarantees to develop a deposit of federal significance it has discovered, business daily Vedomosti reported.

Russia's deposits of federal significance include sites with recoverable reserves of oil from 70 million tons, gas from 50 billion cubic meters, gold from 50 tons and copper from 500,000 tons.

The authors of the bill say the new mechanism is intended to remove the risks when foreigners are not allowed to develop deposits they discover. The new procedure will create interest for foreign operators "to invest considerable funds in completing prospecting and appraisal activities, only if there are firm guarantees that they will be granted the right to carry out further work," the authors of the bill say.

"In 2008, it became clear that the Russian government might not approve the issue of licenses to foreign companies for the development of strategic deposits, even if they discovered them, and many turned away from Russia, thus discouraging an inflow of investments," the business daily quoted an employee of a foreign company investing in Russian mineral extraction as saying. The amendments will be positively perceived by investors, he added.

Foreign companies rarely discover large oil and gas deposits in Russia. The last example is the Nizhnechutinskoye deposit discovered by the UK-based Timan Oil & Gas in 2008 with reserves of 100.1 million tons.

The bill is "a desperate attempt to save the situation in the oil industry," Partner of RusEnergy consulting firm Mikhail Krutikhin said in an interview with Kommersant FM radio station.

According to the expert, "the draconian laws adopted in 2008, which actually prohibited foreigners to explore and develop deposits with so-called strategic reserves, pushed the Russian oil industry far back and deprived it of an inflow of foreign investors’ experience, technologies and finances."

Russian companies lack money, first of all, the expert said. "And, of course, this refers to foreign companies’ technologies and experience, which could strongly help the industry."

"And I can quite assume that the new conditions will be of interest for foreigners. After all, Russia is a promising region from the viewpoint of natural resources reserves and a leader in world hydrocarbon production," the expert said.

"It is important to understand that extraction does not take place in the middle of nowhere and infrastructure also has to be built. I believe that if Western companies discover large deposits in Russia, they will actually be able to develop them only on the terms of cooperation with Russian partners," he added.

"The question is how this will be done," he told TASS. "We have a negative experience of production-sharing agreements in the 1990s when we agreed to the terms, on which the Arab countries had worked almost 50 years ago. But it will be quite normal, if this is done on reasonable terms."

The expert cited the example of Norway where foreign companies’ participation in tenders and their admission to the development of deposits is a normal practice and does not in any way threaten the country’s interests.

"Of course, there are things of strategic nature, which we should not do but in general the development of medium and relatively small deposits would now be beneficial for the country. The experience of leading foreign companies can come in handy for us, especially amid sanctions," the expert said.